Are Korean Stocks Overheating?

  • By Kim Ji-seop

    November 24, 2020 09:32

    The Korean stock market is rising to fresh records every few days even though the real economy is deep in the doldrums.

    The Korea Composite Stock Price Index surpassed 2,600 points for the first time ever on Monday, closing up 49.09 points or 1.92 percent at 2,602.59 points. The previous record was 2,598.19 points in January 2018.

    The coronavirus epidemic did hit the KOSPI hard in March, when it plunged to a yearly low of 1,457.64 points, but it has risen almost 80 percent since then and 15 percent this month alone.

    An electronic board at the Korea Exchange in Seoul shows the Korea Composite Stock Price Index closing at the all-time high of 2,602.59 points on Monday.

    The main reason for the bonanza has been foreign investors. In March they dumped around W12.56 trillion worth of Korean stocks, but individual Korean investors snapped up bargains worth W11.2 trillion (US$1=W1,112).

    However, this month foreigners started buying and local investors selling. So far this month, foreigners bought W6.42 trillion worth of Korean stocks, which is the highest in more than seven years.

    And yet analysts expect the bull run to continue on hopes for COVID-19 vaccines and a strengthening Korean won against the U.S. dollar.

    But the second coronavirus wave in the U.S. and Europe remains a risk, while most of the U.S.' coronavirus support funding is expected to end next month, raising the chance of the KOSPI going on another rollercoaster ride.

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